By Eric Yep
Crude-oil futures were supported by last week's surprise
interest rate cuts by China even as markets brace for the highly
anticipated meeting of the Organization of the Petroleum Exporting
countries later this week.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in January traded at $76.68 a barrel at 0323 GMT, up
$0.17 in the Globex electronic session. January Brent crude on
London's ICE Futures exchange rose $0.25 to $80.61 a barrel.
Late Friday, China's central bank cut interest rates for the
first time in more than two years to boost economic growth, which
is positive for oil demand.
Chinese oil demand growth has been recovering since August, with
October demand holding above the 10-million-barrels-a-day mark for
the second month in a row, Barclays analyst Miswin Mahesh said.
The world's second-largest oil consumer used 5.3% more diesel in
October from a year earlier, which is significant because diesel
accounts for a third of total oil demand and is the largest chunk
of the barrel. Demand for another key fuel--gasoline--grew by
almost 12% in October.
However, any further momentum in demand faces challenges. "In
our view, although the data is encouraging, there are still
significant headwinds to Chinese oil demand growth recovering to
previous levels," Mr. Mahesh said.
Chinese exports of petroleum products are also near record
levels on the back of wider oil refining margins, low oil prices,
the startup of new refineries and new fuel export licenses,
according to Citi Research.
Today's key event is the expiry of Iran's interim nuclear
agreement. The U.S. and other world powers have indicated that it
will be virtually impossible to reach a deal by tonight's deadline,
and options include a potential extension to the negotiations.
A final agreement would have meant that western sanctions on
Iranian oil production are lifted sooner and global oil supply
increases, further pushing down oil prices.
This week's day of reckoning will be OPEC's meeting in Vienna on
Thursday. As energy consultant Johannes Benigni at JBC Asia puts
it--no OPEC meeting for a long time has been preceded by such
amounts of speculation and conspiracy theories.
Whether OPEC, and most importantly Saudi Arabia, decides to cut
oil production and the extent of such a cut, will likely drive oil
price movement for the remainder of this year.
Nymex reformulated gasoline blendstock for December--the
benchmark gasoline contract--rose 33 points to $2.0598 a gallon,
while December diesel traded at $2.4050, 5 points higher.
ICE gasoil for December changed hands at $706.50 a metric ton,
up $2.25 from Friday's settlement.
Write to Eric Yep at eric.yep@wsj.com